Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Company Overview

This MD&A should be read in conjunction with the accompanying unaudited consolidated financial statements.

ADM is a global leader in human and animal nutrition and one of the world’s premier agricultural origination and processing companies. It is one of the world’s leading producers of ingredients for human and animal nutrition, and other products made from nature. The Company uses its significant global asset base to originate and transport agricultural commodities, connecting to markets in 200 countries. The Company also processes corn, oilseeds, and wheat into products for food, animal feed, industrial, and energy uses. The Company also engages in the manufacturing, sale, and distribution of specialty products including natural flavor ingredients, flavor systems, natural colors, proteins, emulsifiers, soluble fiber, polyols, hydrocolloids, natural health and nutrition products, and other specialty food and feed ingredients. The Company uses its global asset network, business acumen, and its relationships with suppliers and customers to efficiently connect the harvest to the home thereby generating returns for our shareholders, principally from margins earned on these activities.

The Company’s operations are organized, managed, and classified into three reportable business segments: Ag Services and Oilseeds, Carbohydrate Solutions, and Nutrition. Each of these segments is organized based upon the nature of products and services offered. The Company’s remaining operations are not reportable business segments, as defined by the applicable accounting standard, and are classified as Other Business. Financial information with respect to the Company’s reportable business segments is set forth in Note 12 of “Notes to Consolidated Financial Statements” included in Item 1 herein, “Financial Statements”.

ADM’s recent significant portfolio actions and announcements include:

the acquisition in February 2022 of Comhan, a leading South African flavor distributor;
the announcement in April 2022 of a growth investment in the Company’s oilseed facility in Mainz, Germany, which is expected to be completed in Q3 2023;
the announcement in April 2022 of a $300 million investment in Decatur, Illinois to expand alternative protein production and the opening of a new, state-of-the-art protein innovation center, which is expected to be completed in the first quarter of 2025;
the announcement in April 2022 of a commitment to achieve 100% deforestation-free supply chains by 2025, five years earlier than previously targeted;
the announcement in May 2022 to significantly expand starch production at the Company’s Marshall, Minnesota facility, which is expected to be completed in the second half of 2023;
the announcement in May 2022 of five projects funded with support from ADM, in partnership with the U.S. Department of Agriculture’s Natural Resources Conservation Service, to provide farmers with technical and financial resources to help plant cover crop on half a million acres;
the announcement in June 2022 of the signing of a memorandum of understanding with Bayer, a global enterprise with core competencies in the life science fields of healthcare and agriculture, to build and implement a sustainable crop protection model to soybean farmers in India; and
the announcement in July 2021 of the signing of an agreement with Farmers Business Network (FBN) to expand availability of FBN’s leading-edge digital farm business management platform, Gradable, to ADM’s network of farmers across North America, offering 55,000 growers a comprehensive digital solution to manage their businesses and measure sustainable production data.

Sustainability is a key driver in ADM’s expanding portfolio of environmentally responsible, plant-derived products. Consumers today increasingly expect their food and drink to come from sustainable ingredients, produced by companies that share their values, and ADM is continually finding new ways to meet those needs through its portfolio actions.

The current phase of the Company’s strategic transformation is focused on two strategic pillars: Productivity and Innovation.

The Productivity pillar includes (1) advancing the roles of the Company’s Centers of Excellence in procurement, supply chain, and operations to deliver additional efficiencies across the enterprise; (2) continued roll out of the 1ADM business transformation program and implementation of improved standardized business processes; and (3) increased use of technology, analytics, and automation at production facilities, in offices, and with customers.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Innovation activities include expansions and investments in (1) improving the customer experience, including leveraging producer relationships and enhancing the use of state-of-the-art digital technology to help customers grow; (2) sustainability-driven innovation, which encompasses the full range of products, solutions, capabilities, and commitments to serve customers’ needs; and (3) growth initiatives, including organic growth to support additional capacity and meet growing demand, and targeted mergers and acquisitions.

ADM will support both pillars with investments in science and technology, which include expanding digital capabilities and investing further in product research and development. All of these efforts will continue to be strengthened by the Company’s ongoing commitment to Readiness.

Environmental and Social Responsibility

The Company’s policy to protect forests, biodiversity, and communities includes provisions that promote conservation of water resources and biodiversity in agricultural landscapes, promote solutions to reduce climate change and greenhouse gas emissions, and support agriculture as a means to advance sustainable development by reducing poverty and increasing food security. Additionally, the policy confirms ADM’s commitment to protect human rights defenders, whistleblowers, complainants, and community spokespersons; ADM’s aspiration to cooperate with all parties necessary to enable access to fair and just remediation; and the Company’s non-compliance protocol for suppliers. By the end of 2022, the Company expects to achieve full traceability of its direct and indirect sourcing throughout its soy supply chains in Brazil, Paraguay, and Argentina. ADM aims to eliminate deforestation from all of the Company’s supply chains by 2025.

In 2020, ADM announced its environmental stewardship goals, collectively called “Strive 35” – an ambitious plan to, by 2035, reduce absolute Scope 1 and 2 greenhouse gas (GHG) emissions by 25 percent from a 2019 baseline, reduce energy intensity by 15 percent, reduce water intensity by 10 percent, and achieve a 90 percent landfill diversion rate.

In 2021, ADM added 5-year interim targets to ensure the Company stays on track to meet its 2035 goals. By 2025, the Company aims to reduce absolute GHG emissions by 1.5%, reduce energy and water intensity by 6% and 5%, respectively, and achieve 87% of its waste diverted from landfill.

In 2021, the Company announced its Scope 3 GHG reduction goal, focused upon the five most material Scope 3 categories for the Company; purchased goods and services; fuel and energy related emissions; upstream transportation and distribution; waste; and processing of solid products/goods. ADM aims to reduce its absolute Scope 3 emissions by 25% from a 2019 baseline by 2035.

Operating Performance Indicators

The Company is exposed to certain risks inherent to an agricultural-based commodity business. These risks are further described in Part I Item 1A, “Risk Factors” included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 and in Part II Item 1A “Risk Factors” on page 55.

The Company’s Ag Services and Oilseeds operations are principally agricultural commodity-based businesses where changes in

selling prices move in relationship to changes in prices of the commodity-based agricultural raw materials. As a result, changes in agricultural commodity prices have relatively equal impacts on both revenues and cost of products sold. Therefore, changes in revenues of these businesses do not necessarily correspond to changes in margins or gross profit. Thus, gross margins per volume or metric ton are more meaningful than gross margins as percentage of revenues.

The Company’s Carbohydrate Solutions operations and Nutrition businesses also utilize agricultural commodities (or products derived from agricultural commodities) as raw materials. However, in these operations, agricultural commodity market price changes do not necessarily correlate to changes in cost of products sold. Therefore, changes in revenues of these businesses may correspond to changes in margins or gross profit. Thus, gross margin rates are more meaningful as a performance indicator in these businesses.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

The Company has consolidated subsidiaries in more than 70 countries. For the majority of the Company’s subsidiaries located outside the United States, the local currency is the functional currency except for certain significant subsidiaries in Switzerland where Euro is the functional currency, and Brazil and Argentina where U.S. dollar is the functional currency. Revenues and expenses denominated in foreign currencies are translated into U.S. dollars at the weighted average exchange rates for the applicable periods. For the majority of the Company’s business activities in Brazil and Argentina, the functional currency is the U.S. dollar; however, certain transactions, including taxes, occur in local currency and require remeasurement to the functional currency. Changes in revenues are expected to be correlated to changes in expenses reported by the Company caused by fluctuations in the exchange rates of foreign currencies, primarily the Euro, British pound, Canadian dollar, and Brazilian real, as compared to the U.S. dollar. Effective April 1, 2022, the Company changed the functional currency of its Turkish entities to the U.S. dollar which did not and is not expected to have a material impact on the Company’s consolidated financial statements.

The Company measures its performance using key financial metrics including net earnings, gross margins, constant currency revenue, segment operating profit, adjusted segment operating profit, earnings before interest, taxes, depreciation, and amortization (EBITDA), adjusted EBITDA, manufacturing expenses, selling, general, and administrative expenses, return on invested capital, economic value added, and operating cash flows before working capital. Some of these metrics are not defined by accounting principles generally accepted in the United States and should be considered in addition to, and not in lieu of, GAAP financial measures. For more information, see “Non-GAAP Financial Measures” on pages 42 and 49. The Company’s financial results can vary significantly due to changes in factors such as fluctuations in energy prices, weather conditions, crop plantings, government programs and policies, trade policies, changes in global demand, general global economic conditions, changes in standards of living, global production of similar and competitive crops, and geopolitical developments. Due to the unpredictable nature of these and other factors, the Company undertakes no responsibility for updating any forward-looking information contained within “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Operations in Ukraine and Russia

ADM employs approximately 650 people in Ukraine and operates an oilseeds crushing plant, a grain port terminal, inland and river silos, and a trading office. Most of the facilities have been temporarily idled since February 24, 2022. The Company’s footprint in Russia is limited and operations have been scaled down to those related to the production and transport of essential food commodities and ingredients.

On February 24, 2022, Russian troops invaded Ukraine. While the Company’s Ukraine and Russian operations have historically represented less than 0.1% of consolidated revenues, the direct and indirect impacts of the ongoing military action could negatively affect ADM’s future operating results. The conflict in Ukraine has created disruptions in global supply chains and has created dislocations of key agricultural commodities. The indirect impact of these dislocations on the Company’s operating results will be a function of a number of variables including supply and demand responses from the rest of the world as well as the length of the conflict and the condition of the agricultural industry and export infrastructure after the conflict ends. For more information, refer to Part II, Item 1A, “Risk Factors”.

As of June 30, 2022, ADM’s assets in Ukraine consisted primarily of current assets that were less than 1% of the Company’s total current assets and an immaterial amount of non-current assets. Of the total current assets in Ukraine, 76% were inventories that represented less than 2% of ADM’s total inventories.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Market Factors Influencing Operations or Results in the Three Months Ended June 30, 2022

The Company is subject to a variety of market factors which affect the Company's operating results. In Ag Services and Oilseeds, the unprecedented market volatility continued along the entire value chain. The conflict in Ukraine continued to have an impact on global commodity flows and prices. Global Trade results were driven by market disconnects, tight supply, and strong destination marketing margins. In South America, a more timely crop saw farmer selling return to historic norms and a tight global supply drove commodity prices higher. North American origination was negatively impacted by slow farmer selling, strained truck and rail systems in the interior, and weather disruption that resulted in delayed planting which negatively impacted fertilizer volume. Crushing margins benefited from strong protein and renewable diesel demand and tight oilseeds stocks. In Refined Products and Other, margins were driven by strong oil demand and tight supply with volatile energy markets driving up biodiesel margins. In Carbohydrate Solutions, demand for starches and sweeteners remained solid with margins remaining steady across the entire portfolio. Production and logistics issues in North America resulted in tightness in the market ahead of peak summer demand. Ethanol export demand was strong, driven by favorable blending economics and government incentives. Domestic gasoline demand was tracking at or above prior year levels, despite elevated gasoline prices. Industry ethanol production increased past the normal spring maintenance period, but poor railroad logistics and heat hampered production later in the quarter. Corn milling margins benefited from strong co-product results, as prices for oil and feed products rose in line with higher underlying corn prices. Nutrition benefited from overall strong demand in various food, beverage, and dietary supplement categories. In Human Nutrition, demand for flavors, flavor systems, specialty proteins, bioactives, and fibers was strong, but increased energy and raw material costs adversely impacted results. In Animal Nutrition, amino acids pricing and margins improved due to a tighter global supply environment, partially offset by the devaluation of certain currencies and weak demand in other product lines due to increased ingredient, freight, and energy costs. ADM’s productivity initiatives are improving the Company’s capabilities to help mitigate the impact of inflation.

Three Months Ended June 30, 2022 Compared to Three Months Ended June 30, 2021

Net earnings attributable to controlling interests increased $0.5 billion from $0.7 billion to $1.2 billion. Segment operating profit increased $0.7 billion from $1.1 billion to $1.8 billion and included a net charge of $9 million consisting of asset impairment charges. Included in segment operating profit in the prior year quarter was a net charge of $15 million consisting of asset impairment and restructuring charges of $37 million, partially offset by gains on the sale of assets of $22 million. Adjusted segment operating profit (a non-GAAP measure) increased $0.7 billion to $1.8 billion due primarily to higher results in all businesses. Corporate results in the current quarter were a net charge of $321 million and included a mark-to-market gain of $19 million on the conversion option of the exchangeable bonds issued in August 2020. Corporate results in the prior year quarter were a net charge of $320 million and included a pension settlement charge of $82 million and a mark-to-market gain of $30 million on the conversion option of the exchangeable bonds issued in August 2020.

Income tax expense increased $166 million to $279 million. The effective tax rate for the quarter ended June 30, 2022 was 18.4% compared to 13.7% for the quarter ended June 30, 2021. The change in the rate was due primarily to changes in the geographic mix of pretax earnings and the impact of discrete tax items.

Analysis of Statements of Earnings

Processed volumes by product for the quarter are as follows (in metric tons):


	Three Months Ended
	June 30,
(In thousands)	2022	2021	Change
Oilseeds	8,208	8,778	(570)
Corn	4,776	5,042	(266)
Total	12,984	13,820	(836)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

The Company generally operates its production facilities, on an overall basis, at or near capacity, adjusting facilities individually, as needed, to react to the current margin environment and seasonal local supply and demand conditions. The overall decrease in oilseeds processed volumes was primarily related to decreased crush rates resulting from the decline in global demand for rapeseed, temporarily idled facility in Paraguay due to crop failure, and the indefinite shutdown of a Ukraine facility since February 2022. The overall decrease in corn was primarily related to logistical challenges surrounding railcar availability and the sale of the Peoria, Illinois facility in November 2021.

Revenues by segment for the quarter are as follows:


	Three Months Ended
	June 30,
	2022		2021		Change
	(In millions)












Ag Services and Oilseeds
Ag Services	$	14,333	$	12,815	$	1,518
Crushing	3,362		2,827		535
Refined Products and Other	3,734		2,629		1,105
Total Ag Services and Oilseeds	21,429		18,271		3,158

Carbohydrate Solutions
Starches and Sweeteners	2,519		1,846		673
Vantage Corn Processors	1,232		974		258
Total Carbohydrate Solutions	3,751		2,820		931

Nutrition
Human Nutrition	1,020		848		172
Animal Nutrition	983		885		98
Total Nutrition	2,003		1,733		270

Other Business	101		102		(1)

Total	$	27,284	$	22,926	$	4,358

Revenues and cost of products sold in a commodity merchandising and processing business are significantly correlated to the underlying commodity prices and volumes. During periods of significant changes in commodity prices, the underlying performance of the Company is better evaluated by looking at margins because both revenues and cost of products sold, particularly in Ag Services and Oilseeds, generally have a relatively equal impact from market price changes, which generally result in an insignificant impact to gross profit.

Revenues increased $4.4 billion to $27.3 billion due to higher sales prices ($5.2 billion), partially offset by lower sales volumes ($0.8 billion). Higher sales prices of oils, soybeans, corn, meal, farming materials, wheat, biodiesel, flours, and alcohol and higher sales volumes of milled rice, were partially offset by lower volumes of soybeans, oils, and corn. Ag Services and Oilseeds revenues increased 17% to $21.4 billion due to higher sales prices ($4.2 billion), partially offset by lower sales volumes ($1.0 billion). Carbohydrate Solutions revenues increased 33% to $3.8 billion due to higher sales prices ($0.8 billion) and higher sales volumes ($0.1 billion) despite the loss of USD-grade industrial alcohol volumes from the divested Peoria, Illinois facility. Nutrition revenues increased 16% to $2.0 billion due to higher sales prices ($0.2 billion) and higher sales volumes ($0.1 billion).

Cost of products sold increased $3.7 billion to $25.2 billion due principally to higher average commodity costs. Manufacturing expenses increased $0.2 billion to $1.7 billion due principally to higher energy costs, operating supplies, and maintenance.

Foreign currency translation decreased revenues and cost of products sold by $0.7 billion.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Gross profit increased $637 million or 44%, to $2.1 billion due principally to higher results in Ag Services and Oilseeds ($563 million), Starches and Sweeteners ($97 million), and Nutrition ($63 million), partially offset by lower results in Vantage Corn Processors ($45 million) and Other ($36 million). These factors are explained in the segment operating profit discussion on page 41.

Selling, general, and administrative expenses increased $75 million to $814 million due primarily to higher IT and project-related expenses, higher insurance costs, increased provisions for bad debt, and amortization of intangibles from new acquisitions.

Asset impairment, exit, and restructuring costs decreased $22 million to $1 million. Charges in the current quarter were not material. Charges in the prior year quarter consisted of $23 million of impairments related to certain long-lived assets and $1 million of restructuring charges, presented as specified items within segment operating profit, and a restructuring adjustment of $1 million in Corporate.

Equity in earnings of unconsolidated affiliates increased $29 million to $192 million due primarily to higher earnings from the Company’s investment in Wilmar.

Investment income decreased $18 million to $32 million due primarily to lower revaluation gains of $2 million compared to $40 million in the prior year quarter, partially offset by higher interest income.

Interest expense increased $33 million to $73 million due to higher debt balances and increased short-term rates on the Company’s U.S. and European commercial paper borrowing programs. Interest expense in the current quarter also included a $19 million mark-to-market gain adjustment related to the conversion option of the exchangeable bonds issued in August 2020, compared to a $30 million mark-to-market gain adjustment in the prior year quarter.

Other income-net increased from a net expense of $49 million in the prior year quarter to a net income of $83 million. Income in the current quarter included gains on disposals of individually insignificant assets in the ordinary course of business, the non-service components of net pension benefit income, a $50 million one-time payment from the USDA Biofuel Producer Recovery Program, foreign exchange gains, and other expense. Expense in the prior year quarter included a non-cash pension settlement charge of $82 million related to the purchase of group annuity contracts that irrevocably transferred the future benefit obligations and annuity administration for certain salaried and hourly retirees and terminated vested participants under the ADM Retirement Plan and ADM Pension Plan for Hourly-Wage Employees to independent third parties, partially offset by gains on the sale of certain assets and disposals of individually insignificant assets in the ordinary course of business, the non-service components of net pension benefit income, and foreign exchange gains.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Segment operating profit (loss), adjusted segment operating profit (a non-GAAP measure), and earnings before income taxes for the quarter are as follows:


	Three Months Ended
	June 30,
Segment Operating Profit (Loss)	2022		2021		Change
	(In millions)












Ag Services and Oilseeds
Ag Services	$	407	$	190	$	217
Crushing	468		150		318
Refined Products and Other	130		130		—
Wilmar	114		100		14
Total Ag Services and Oilseeds	1,119		570		549

Carbohydrate Solutions
Starches and Sweeteners	393		306		87
Vantage Corn Processors	80		77		3
Total Carbohydrate Solutions	473		383		90

Nutrition
Human Nutrition	183		162		21
Animal Nutrition	56		39		17
Total Nutrition	239		201		38

Other Business	18		6		12

Specified Items:
Gains on sales of assets and businesses	—		22		(22)
Asset impairment, restructuring, and settlement charges	(9)		(37)		28

Total Specified Items	(9)		(15)		6

Total Segment Operating Profit	$	1,840	$	1,145	$	695

Adjusted Segment Operating Profit(1)	$	1,849	$	1,160	$	689

Segment Operating Profit	$	1,840	$	1,145	$	695
Corporate	(321)		(320)		(1)
Earnings Before Income Taxes	$	1,519	$	825	$	694

(1) Adjusted segment operating profit is segment operating profit excluding the above specified items.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Ag Services and Oilseeds operating profit increased 96%. Ag Services results were significantly higher versus the year-ago quarter. Global trade profits were significantly higher year-over-year driven by the destination marketing’s ability to meet customer demand across the globe which helped drive strong volumes and margins and good execution in global ocean freight, as well as net timing gains for the quarter. North America had solid performance as export volumes remained strong in a good global demand environment, though year-over-year results were lower due to an insurance settlement as well as strong positioning gains in the prior year quarter. In South America, results were higher based on stronger origination volumes and better margins driven by strong global grain demand. Crushing delivered substantially higher results. Strong soy crush margins drove improved performance in all three regions, as meal and oil demand remained robust. Positive net timing effects for the quarter, versus the negative timing in the prior year quarter, also helped drive higher year-over-year results. Refined Products and Other results were similar to the prior-year quarter, as strong demand for biofuels and food oils drove strong refining premiums and biodiesel margins, were offset by negative timing effects. Equity earnings from Wilmar were significantly higher versus the second quarter of 2021.

Carbohydrate Solutions operating profit increased 23%. Starches and Sweeteners, including ethanol production from the wet mills, delivered much better results due to solid demand as food service volumes reached close to pre-pandemic levels. Corn co-products, including strong demand for corn oil, and effective risk management results drove higher ethanol and sweetener margins. Vantage Corn Processors results were slightly higher in an environment of good gasoline demand and strong ethanol blending economics. A $50 million one-time payment from the USDA Biofuel Producer Recovery Program helped offset the prior year’s strong industrial alcohol results from the now-sold Peoria, Illinois facility as well as valuation losses on ethanol inventory as prices fell late in the quarter.

Nutrition operating profit increased 19%. Human Nutrition delivered higher year-over-year results as demand across its diverse product portfolio remained robust. Flavors grew revenue in North America, Europe, Middle East, and Africa (EMEA), and South America, though profits were lower due to negative currency effects in EMEA as well as weaker results in Asia-Pacific. Healthy demand for alternative proteins resulted in strong soy protein volumes and margins, as contributions from the Sojaprotein acquisition, as well as good demand for texturants, drove higher results in Specialty Ingredients. Strength across probiotics, including in the recently-acquired Deerland Probiotics and Enzymes business, as well as robust demand for fibers, contributed to a stronger quarter in Health and Wellness. Animal Nutrition profits were up substantially year-over-year, driven by continued strong volumes and margins in amino acids.

Other Business operating profit increased $12 million, driven primarily by higher ADM Investor Services earnings.

Corporate results for the quarter are as follows:


	Three Months Ended
	June 30,
	2022		2021		Change
	(In millions)

Interest expense-net	$	(87)	$	(70)	$	(17)
Unallocated corporate costs	(267)		(248)		(19)



Gain on debt conversion option	19		30		(11)
Restructuring and settlement charges	1		(81)		82
Other income	13		49		(36)
Total Corporate	$	(321)	$	(320)	$	(1)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Corporate results were a net charge of $321 million in the current quarter compared to a net charge of $320 million in the prior year quarter. Interest expense-net increased $17 million due to higher debt balances and increased short-term rates on the Company’s U.S. and European commercial paper borrowing programs. Unallocated corporate costs increased $19 million due primarily to higher IT and project-related costs and higher costs in the Company’s centers of excellence. Gain on debt conversion option was related to the mark-to-market adjustment of the conversion option of the exchangeable bonds issued in August 2020. Restructuring and settlement charges in the prior year quarter included a pension settlement charge of $82 million related to the purchase of group annuity contracts that irrevocably transferred the future benefit obligations and annuity administration for certain salaried and hourly retirees and terminated vested participants under the ADM Retirement Plan and ADM Pension Plan for Hourly-Wage Employees to independent third parties. Other income in the current quarter included the non-service components of net pension benefit income of $6 million, an investment revaluation gain of $2 million, and foreign exchange gains, partially offset by railroad maintenance expenses. Other income in the prior year quarter included the non-service components of net pension benefit income of $5 million, an investment revaluation gain of $40 million, and foreign exchange gains.

Non-GAAP Financial Measures

The Company uses adjusted earnings per share (EPS), adjusted EBITDA, and adjusted segment operating profit, non-GAAP financial measures as defined by the Securities and Exchange Commission, to evaluate the Company’s financial performance. These performance measures are not defined by accounting principles generally accepted in the United States and should be considered in addition to, and not in lieu of, GAAP financial measures.

Adjusted EPS is defined as diluted EPS adjusted for the effects on reported diluted EPS of specified items. Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, and amortization, adjusted for specified items. The Company calculates adjusted EBITDA by removing the impact of specified items and adding back the amounts of interest expense and depreciation and amortization to earnings before income taxes. Adjusted segment operating profit is segment operating profit adjusted, where applicable, for specified items.

Management believes that adjusted EPS, adjusted EBITDA, and adjusted segment operating profit are useful measures of the Company’s performance because they provide investors additional information about the Company’s operations allowing better evaluation of underlying business performance and better period-to-period comparability. Adjusted EPS, adjusted EBITDA, and adjusted segment operating profit are not intended to replace or be an alternative to diluted EPS, earnings before income taxes, and segment operating profit, respectively, the most directly comparable amounts reported under GAAP.

The table below provides a reconciliation of diluted EPS to adjusted EPS for the three months ended June 30, 2022 and 2021.


	Three months ended June 30,
	2022				2021
	In millions		Per share		In millions		Per share
Average number of shares outstanding - diluted	568				566

Net earnings and reported EPS (fully diluted)	$	1,236	$	2.18	$	712	$	1.26
Adjustments:
Gains on sales of assets and businesses - net of tax of $5 million in 2021(1)	—		—		(17)		(0.03)
Gain on debt conversion option - net of tax of $0 (1)	(19)		(0.04)		(30)		(0.06)
Asset impairment, restructuring, and settlement charges - net of tax of $2 million in 2022 and $28 million in 2021 (1)	6		0.01		90		0.16
Certain discrete tax adjustments	(1)		—		(1)		—
Total adjustments	(14)		(0.03)		42		0.07
Adjusted net earnings and adjusted EPS	$	1,222	$	2.15	$	754	$	1.33

(1) Tax effected using the U.S. and other applicable tax rates.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

The tables below provide a reconciliation of earnings before income taxes to adjusted EBITDA and adjusted EBITDA by segment for the three months ended June 30, 2022 and 2021.


	Three months ended
	June 30,
(In millions)	2022		2021		Change
Earnings before income taxes	$	1,519	$	825	$	694
Interest expense	73		40		33
Depreciation and amortization	257		243		14
Gains on sales of assets and businesses	—		(22)		22
Railroad maintenance expenses	9		3		6
Asset impairment, restructuring, and settlement charges	8		118		(110)
Adjusted EBITDA	$	1,866	$	1,207	$	659


	Three months ended
	June 30,
(In millions)	2022		2021		Change


Ag Services and Oilseeds	$	1,207	$	661	$	546
Carbohydrate Solutions	550		467		83
Nutrition	304		253		51
Other Business	24		7		17
Corporate	(219)		(181)		(38)
Adjusted EBITDA	$	1,866	$	1,207	$	659

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Market Factors Influencing Operations or Results in the Six Months Ended June 30, 2022

The Company is subject to a variety of market factors which affect the Company's operating results. In Ag Services and Oilseeds, tight global stocks driven by a short crop in South America and good global demand drove commodity prices higher. The conflict in Ukraine resulted in even tighter global stocks of commodities and created high volatility which had a positive impact on North and South American origination prices. Global Trade results were driven by market disconnects, tight supply, strong destination marketing margins, and firm ocean freight rates. North American origination was negatively impacted by weather-related supply disruption and delayed planting due to unfavorable weather which negatively impacted fertilizer volume. Crushing margins benefited from strong protein and renewable diesel demand and tight oilseeds stocks. In Refined Products and Other, margins were driven by strong oil demand and tight supply with volatile energy markets driving up biodiesel margins. In Carbohydrate Solutions, demand for starches and sweeteners was solid with margins remaining steady despite higher input costs. Domestic ethanol demand remained at or above the prior year, but below pre-pandemic levels. Export ethanol demand was strong, driven by favorable blending economics and government incentives. Industry production of ethanol returned to pre-pandemic levels as gasoline consumption remained robust even at higher gas prices. Corn milling margins benefited from strong co-product results, as prices for oil and feed products rose in line with higher underlying corn prices. Corn costs were volatile and higher, in part due to a relatively low projected corn stocks-to-use ratio and uncertainty caused by the conflict in Ukraine. Nutrition benefited from overall strong demand in various various food, beverage, and dietary supplement categories. In Human Nutrition, strong demand for flavors, flavor systems, specialty proteins, bioactives, and fibers were partially offset by higher energy and raw material costs. Margins remained robust on strong price actions. In Animal Nutrition, amino acids pricing and margins improved due to a tighter global supply environment, partially offset by the devaluation of certain currencies and weak demand in other product lines with some customers cutting products out of formulation due to increased ingredient, freight, and energy costs. ADM’s productivity initiatives are improving the Company’s capabilities to help mitigate the impact of inflation.

Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021

Net earnings attributable to controlling interests increased $0.9 billion to $2.3 billion. Segment operating profit increased $1.1 billion to $3.4 billion and included a net charge of $26 million consisting of asset impairment, restructuring, and settlement charges of $27 million and a gain on sale of assets of $1 million. Included in segment operating profit in the prior period was a net charge of $109 million consisting of gains on the sale of assets of $22 million and asset impairment, restructuring, and settlement charges of $131 million. Adjusted segment operating profit (a non-GAAP measure) increased $1.0 billion to $3.4 billion due primarily to higher results in all businesses except in Vantage Corn Processors. Corporate results in the current and prior periods were a net charge of $0.6 billion. Corporate results in the current period included a mark-to-market gain of $4 million on the conversion option of the exchangeable bonds issued in August 2020. Corporate results in the prior period included a pension settlement charge of $82 million and a mark-to-market gain of $10 million on the conversion option of the exchangeable bonds issued in August 2020.

Income taxes of $486 million increased $242 million. The Company’s effective tax rate for the six months ended June 30, 2022 was 17.4% compared to 14.8% for the six months ended June 30, 2021. The change in the rate was due primarily to changes in the geographic mix of pretax earnings and the impact of discrete tax items.

Analysis of Statements of Earnings

Processed volumes by product for the six months ended June 30, 2022 and 2021 are as follows (in metric tons):


	Six Months Ended
	June 30,
(In thousands)	2022	2021	Change
Oilseeds	16,699	17,738	(1,039)
Corn	9,588	8,692	896
Total	26,287	26,430	(143)

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

The Company generally operates its production facilities, on an overall basis, at or near capacity, adjusting facilities individually, as needed, to react to the current margin environment and seasonal local supply and demand conditions. The overall decrease in oilseeds processed volumes was primarily related to decreased crush rates resulting from the decline in global demand for rapeseed, temporarily idled facility in Paraguay due to crop failure, and the indefinite shutdown of a Ukraine facility since February 2022. The overall increase in corn was primarily related to two dry mill facilities that were idled since April 2020 and restarted in April 2021, partially offset by the sale of the Peoria, Illinois facility in November 2021 and logistical challenges surrounding railcar availability in the second quarter of 2022.

Revenues by segment for the six months ended six months ended June 30, 2022 and 2021 are as follows:


	Six Months Ended
	June 30,
	2022		2021		Change
	(In millions)












Ag Services and Oilseeds
Ag Services	$	26,180	$	22,961	$	3,219
Crushing	6,584		5,569		1,015
Refined Products and Other	6,918		4,748		2,170
Total Ag Services and Oilseeds	39,682		33,278		6,404

Carbohydrate Solutions
Starches and Sweeteners	5,017		3,591		1,426
Vantage Corn Processors	2,100		1,452		648
Total Carbohydrate Solutions	7,117		5,043		2,074

Nutrition
Human Nutrition	1,978		1,602		376
Animal Nutrition	1,949		1,694		255
Total Nutrition	3,927		3,296		631

Other Business	208		202		6
Total	$	50,934	$	41,819	$	9,115

Revenues and cost of products sold in a commodity merchandising and processing business are significantly correlated to the underlying commodity prices and volumes. During periods of significant changes in commodity prices, the underlying performance of the Company is better evaluated by looking at margins because both revenues and cost of products sold, particularly in Ag Services and Oilseeds, generally have a relatively equal impact from commodity price changes, which generally result in an insignificant impact to gross profit.

Revenues increased $9.1 billion to $50.9 billion due to higher sales prices ($9.9 billion), partially offset by lower sales volumes ($0.8 billion). Higher sales prices of oils, soybeans, corn, wheat, farming materials, meal, biodiesel, flours, and alcohol, and higher sales volumes of milled rice and alcohol, were partially offset by lower volumes of soybeans, oils, corn, and wheat. Ag Services and Oilseeds revenues increased 19% to $39.7 billion due to higher sales prices ($7.9 billion), partially offset by lower sales volumes ($1.5 billion). Carbohydrate Solutions revenues increased 41% to $7.1 billion due to higher sales prices ($1.6 billion) and higher sales volumes ($0.5 billion) despite the loss of USD-grade industrial alcohol volumes from the divested Peoria, Illinois facility. Nutrition revenues increased 19% to $3.9 billion due to higher sales prices ($0.4 billion) and higher sales volumes ($0.2 billion).

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Cost of products sold increased $8.1 billion to $46.9 billion due principally to higher average commodity costs. Manufacturing expenses increased $0.4 billion to $3.3 billion due principally to higher energy costs, operating supplies, and maintenance.

Foreign currency translation decreased revenues and cost of goods sold by $1.2 billion and $1.1 billion, respectively.

Gross profit increased $1.0 billion or 33% to $4.0 billion due principally to higher results in Ag Services and Oilseeds ($745 million), Starches and Sweeteners ($203 million), and Nutrition ($145 million), partially offset by lower results in Vantage Corn Processors ($78 million) and Other ($23 million) These factors are explained in the segment operating profit discussion on page 48.

Selling, general, and administrative expenses increased $0.2 billion to $1.6 billion due principally to higher IT and project-related expenses, higher insurance costs, increased provisions for bad debt, amortization of intangibles from new acquisitions, and higher salaries and benefit costs.

Asset impairment, exit, and restructuring costs decreased $80 million to $2 million. Charges in the current period were not material. Charges in the prior period consisted of $54 million of impairments related to certain long-lived assets and $24 million of restructuring charges, presented as specified items within segment operating profit, and $4 million of restructuring charges in Corporate.

Equity in earnings of unconsolidated affiliates increased $108 million to $396 million due primarily to higher earnings from the Company’s investments in Wilmar, Almidones Mexicanos S.A., Olenex, SoyVen, and Stratas Foods LLC.

Investment income increased $28 million to $91 million due primarily to higher interest income, partially offset by lower revaluation gains of $36 million compared to $40 million in the prior period.

Interest expense increased $38 million to $165 million due to higher debt balances and increased short-term rates on the Company’s U.S. and European commercial paper borrowing programs. Interest expense in the current period also included a $4 million mark-to-market gain adjustment related to the conversion option of the exchangeable bonds issued in August 2020 compared to a $10 million mark-to-market gain adjustment in the prior period.

Other income-net increased from a net expense of $16 million in the prior period to a net income of $116 million. Income in the current period included gains on disposals of individually insignificant assets in the ordinary course of business, the non-service components of net pension benefit income, a $50 million one-time payment from the USDA Biofuel Producer Recovery Program, foreign exchange gains, and other expense. Expense in the prior period included a non-cash pension settlement charge of $82 million related to the purchase of group annuity contracts that irrevocably transferred the future benefit obligations and annuity administration for certain salaried and hourly retirees and terminated vested participants under the ADM Retirement Plan and ADM Pension Plan for Hourly-Wage Employees to independent third parties, partially offset by gains on the sale of certain assets and disposals of individually insignificant assets in the ordinary course of business, the non-service components of net pension benefit income, foreign exchange gains, and other income.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Segment operating profit, adjusted segment operating profit (a non-GAAP measure), and earnings before income taxes for the six months ended June 30, 2022 and 2021 are as follows:


	Six Months Ended
	June 30,
Segment Operating Profit (Loss)	2022		2021		Change
	(In millions)











Ag Services and Oilseeds
Ag Services	$	665	$	399	$	266
Crushing	896		532		364
Refined Products and Other	328		231		97
Wilmar	238		185		53
Total Ag Services and Oilseeds	2,127		1,347		780

Carbohydrate Solutions
Starches and Sweeteners	709		528		181
Vantage Corn Processors	81		114		(33)
Total Carbohydrate Solutions	790		642		148

Nutrition
Human Nutrition	324		290		34
Animal Nutrition	104		65		39
Total Nutrition	428		355		73

Other Business	60		15		45

Specified Items:
Gains (losses) on sales of assets and businesses	1		22		(21)
Asset impairment, restructuring, and settlement charges	(27)		(131)		104

Total Specified Items	(26)		(109)		83

Total Segment Operating Profit	$	3,379	$	2,250	$	1,129

Adjusted Segment Operating Profit(1)	$	3,405	$	2,359	$	1,046

Segment Operating Profit	$	3,379	$	2,250	$	1,129
Corporate	(589)		(601)		12
Earnings Before Income Taxes	$	2,790	$	1,649	$	1,141

(1) Adjusted segment operating profit is segment operating profit excluding the above specified items.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Ag Services and Oilseeds operating profit increased 58%. Ag Services results were significantly higher versus the first half of 2021. Global trade results were higher, driven by strong performances in destination marketing and global ocean freight. North American origination margins and volumes were lower year-over-year. South America results were higher, driven by better origination margins on good demand for grain. Crushing was higher year over year in a strong global margin environment driven by robust protein and vegetable oil demand. Positive net timing effects in the current period versus negative timing effects in the prior period helped drive higher year-over-year results. Refined Products and Other results were higher than the prior period, driven by healthy refining premiums and good refined oils demand in North America, as well as strong biodiesel margins in EMEA. Equity earnings from Wilmar were higher versus the first half of 2021.

Carbohydrate Solutions operating profit increased 23%. Starches and Sweeteners, including ethanol production from the wet mills, delivered higher results versus the prior period, driven by solid margins across sweeteners and starches as well corn co-products, improved ethanol margins, and effective risk management. Sales volumes for starches and sweeteners continued their recovery, and the biosolutions platform continued to deliver revenue growth as demand for plant-based products expanded into more diverse applications. Vantage Corn Processors results were lower versus the prior period with improved ethanol margins and a $50 million one-time payment from the USDA Biofuel Producer Recovery Program partially offsetting the prior period’s strong positioning gains and industrial alcohol results from the now-sold Peoria, Illinois facility.

Nutrition operating profit increased 21%. Human Nutrition delivered higher year-over-year results. Flavors results were lower driven by softer demand in China. Strong sales growth in alternative proteins, including contribution from the Sojaprotein acquisition, and good demand for texturants offset some higher operating costs to help deliver better year-over-year results in Specialty Ingredients. Health and Wellness was also higher year-over-year, powered by probiotics, including contribution from the November 2021 Deerland Probiotics and Enzymes acquisition, and robust demand for fiber and Vitamin E. Animal Nutrition profits were higher than the prior period, due primarily to strength in amino acids.

Other Business operating profit increased $45 million, driven primarily by better performance in captive insurance, including reduced claim settlements versus the prior period and higher ADM Investor Services earnings.

Corporate results for the six months ended June 30, 2022 and 2021 are as follows:


	Six Months Ended
	June 30,
	2022		2021		Change
	(In millions)

Interest expense-net	$	(163)	$	(134)	(29)
Unallocated corporate costs	(476)		(450)		(26)
Loss on sale of assets	(3)		—		(3)
Expenses related to acquisitions	(2)		—		(2)

Gain on debt conversion option	4		10		(6)
Restructuring and settlement charges	2		(86)		88
Other income	49		59		(10)
Total Corporate	$	(589)	$	(601)	$	12

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Corporate results were a net charge of $0.6 billion in the current period which was comparable to the prior period. Interest expense-net increased $29 million due to higher debt balances, increased short-term rates on the Company’s U.S. and European commercial paper borrowing programs, and interest related to a tax item. Unallocated corporate costs increased $26 million due primarily to higher IT and project-related costs and higher costs in the Company’s centers of excellence, partially offset by lower incentive compensation accruals. Gain on debt conversion option was related to the mark-to-market adjustment of the conversion option of the exchangeable bonds issued in August 2020. Restructuring and settlement charges in the prior period included a non-cash pension settlement charge of $82 million related to the purchase of group annuity contracts that irrevocably transferred the future benefit obligations and annuity administration for certain salaried and hourly retirees and terminated vested participants under the ADM Retirement Plant and ADM Pension Plan for Hourly-Wage Employees to independent third parties, and restructuring charges. Other income in the current period included the non-service components of net pension benefit income of $12 million, an investment revaluation gain of $36 million and foreign exchange gains, partially offset by railroad maintenance expenses. Other income in the prior period included the non-service components of net pension benefit income of $11 million, an investment revaluation gain of $40 million, and foreign exchange gains.

Non-GAAP Financial Measures

The Company uses adjusted EPS, adjusted EBITDA, and adjusted segment operating profit, non-GAAP financial measures as defined by the Securities and Exchange Commission, to evaluate the Company’s financial performance. These performance measures are not defined by accounting principles generally accepted in the United States and should be considered in addition to, and not in lieu of, GAAP financial measures.

The table below provides a reconciliation of diluted EPS to adjusted EPS for the six months ended June 30, 2022 and 2021.


	Six months ended June 30,
	2022				2021
	In millions		Per share		In millions		Per share
Average number of shares outstanding - diluted	568				565

Net earnings and reported EPS (fully diluted)	$	2,290	$	4.03	$	1,401	$	2.48
Adjustments:
(Gains) losses on sales of assets and businesses - net of tax of $0 million in 2022 and $5 million in 2021 (1)	2		—		(17)		(0.03)
Asset impairment, restructuring, and settlement charges - net of tax of $5 million in 2022 and $53 million in 2021 (1)	20		0.04		164		0.29
Expenses related to acquisitions - net of tax of $1 million (1)	1		—		—		—

Gain on debt conversion option - net of tax of $0 (1)	(4)		(0.01)		(10)		(0.02)
Certain discrete tax adjustments	(5)		(0.01)		(1)		—
Total adjustments	14		0.02		136		0.24
Adjusted net earnings and adjusted EPS	$	2,304	$	4.05	$	1,537	$	2.72

(1) Tax effected using the U.S. and other applicable tax rates.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

The tables below provide a reconciliation of earnings before income taxes to adjusted EBITDA and adjusted EBITDA by segment for the six months ended June 30, 2022 and 2021.


	Six months ended
	June 30,
(In millions)	2022		2021		Change
Earnings before income taxes	$	2,790	$	1,649	$	1,141
Interest expense	165		127		38
Depreciation and amortization	514		492		22
(Gains) losses on sales of assets and businesses	2		(22)		24

Expenses related to acquisitions	2		—		2
Railroad maintenance expenses	9		3		6
Asset impairment, restructuring, and settlement charges	25		217		(192)
Adjusted EBITDA	$	3,507	$	2,466	$	1,041









	Six months ended
	June 30,
(In millions)	2022		2021		Change













Ag Services and Oilseeds	$	2,303	$	1,532	$	771
Carbohydrate Solutions	946		809		137






Nutrition	558		462		96






Other Business	68		18		50





Corporate	(368)		(355)		(13)









Adjusted EBITDA	$	3,507	$	2,466	$	1,041

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Liquidity and Capital Resources

A Company objective is to have sufficient liquidity, balance sheet strength, and financial flexibility to fund the operating and capital requirements of a capital-intensive agricultural commodity-based business. The Company depends on access to credit markets, which can be impacted by its credit rating and factors outside of ADM’s control, to fund its working capital needs and capital expenditures. The primary source of funds to finance ADM’s operations, capital expenditures, and advancement of its growth strategy is cash generated by operations and lines of credit, including a commercial paper borrowing facility and accounts receivable securitization programs. In addition, the Company believes it has access to funds from public and private equity and debt capital markets in both U.S. and international markets.

Cash used in operating activities was $0.7 billion for the six months ended June 30, 2022 compared to cash provided of $3.0 billion for the same period last year. Working capital changes decreased cash by $3.9 billion for the six months ended June 30, 2022 compared to an increase of $0.8 billion for the same period last year. Segregated cash and investments increased approximately $1.8 due to increased trading activity in the Company’s futures commission and brokerage business. Trade receivables increased $2.2 billion due to higher revenues. Inventories increased approximately $0.3 billion due to higher inventory prices partially offset by lower inventory volumes. Other current assets increased $1.6 billion primarily due to increases in contracts and futures gains, margin deposits and grain accounts, and customer omnibus receivable. Brokerage payables increased approximately $2.5 billion due to increased customer trading activity in the Company’s futures commission and brokerage business.

Cash used in investing activities was $0.6 billion for the six months ended June 30, 2022 compared to $0.4 billion for the same period last year. Capital expenditures for the six months ended June 30, 2022 were $0.5 billion compared to $0.4 billion for the same period last year. Other-net for the six months ended June 30, 2022 of $0.1 billion consisted of new and additional cost method equity investments.

Cash provided by financing activities was $1.5 billion for the six months ended June 30, 2022 compared to a use of $0.6 billion for the same period last year. Long-term debt borrowings for the six months ended June 30, 2022 of $0.8 billion consisted of the $750 million aggregate principal amount of 2.900% notes due 2032, compared to long-term debt borrowings for the same period last year of $0.6 billion which consisted of the €0.5 billion aggregate principal amount of fixed-to-floating rate senior notes due 2022 issued in a private placement on March 25, 2021. The Company expects to apply an amount equal to the proceeds from the borrowings in the current period to finance or refinance eligible green projects and/or eligible social projects. Proceeds from the borrowings in the prior period were used for general corporate purposes. Net borrowings from short-term credit agreements for the six months ended June 30, 2022 were $1.4 billion compared to net payments of $0.8 billion for the same period last year. Proceeds from the current period short-term borrowings were used to fund working capital needs. Dividends of $0.5 billion for the six months ended June 30, 2022 were comparable to the same period last year. Share repurchases for the six months ended June 30, 2022 were $0.2 billion compared to an insignificant amount for the same period last year.

At June 30, 2022, the Company had $0.9 billion of cash and cash equivalents and a current ratio, defined as current assets divided by current liabilities, of 1.5 to 1. Included in working capital was $8.9 billion of readily marketable commodity inventories. At June 30, 2022, the Company’s capital resources included shareholders’ equity of $24.4 billion and lines of credit, including the accounts receivable securitization programs described below, totaling $14.7 billion, of which $10.6 billion was unused. The Company’s ratio of long-term debt to total capital (the sum of the Company’s long-term debt and shareholders’ equity) was 25% and 26% at June 30, 2022 and December 31, 2021, respectively. The Company uses this ratio as a measure of the Company’s long-term indebtedness and an indicator of financial flexibility. The Company’s ratio of net debt (the sum of short-term debt, current maturities of long-term debt, and long-term debt less the sum of cash and cash equivalents and short-term marketable securities) to capital (the sum of net debt and shareholders’ equity) was 30% and 28% at June 30, 2022 and December 31, 2021, respectively. Of the Company’s total lines of credit, $6.5 billion supported the combined U.S. and European commercial paper borrowing programs, against which there was $0.2 billion commercial paper outstanding at June 30, 2022.

As of June 30, 2022, the Company had $0.9 billion of cash and cash equivalents, $0.4 billion of which was cash held by foreign subsidiaries whose undistributed earnings are considered indefinitely reinvested. Based on the Company’s historical ability to generate sufficient cash flows from its U.S. operations and unused and available U.S. credit capacity of $9.5 billion, the Company has asserted that these funds are indefinitely reinvested outside the U.S.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

The Company has accounts receivable securitization programs (the “Programs”) with certain commercial paper conduit purchasers and committed purchasers. The Programs provide the Company with up to $2.6 billion in funding against accounts receivable transferred into the Programs and expands the Company’s access to liquidity through efficient use of its balance sheet assets (see Note 14 of “Notes to Consolidated Financial Statements” included in Item 1 herein, “Financial Statements” for more information and disclosures on the Programs). As of June 30, 2022, the Company had $0.9 billion unused capacity of its facility under the Programs.

As of June 30, 2022, the Company has total available liquidity of $11.5 billion comprised of cash and cash equivalents and unused lines of credit.

For the six months ended June 30, 2022, the Company spent approximately $0.5 billion in capital expenditures, $0.5 billion in dividends, and $0.2 billion in share repurchases. The Company has a stock repurchase program. Under the program, the Company has 102.2 million shares remaining as of June 30, 2022 that may be repurchased until December 31, 2024.

In 2022, the Company expects total capital expenditures of approximately $1.3 billion and additional cash outlays of approximately $0.9 billion in dividends and up to $1.2 billion in share repurchases, subject to other strategic uses of capital and the evolution of operating cash flows and the working capital position throughout the year.

Contractual Obligations and Commercial Commitments

The Company’s purchase obligations as of June 30, 2022 and December 31, 2021 were $19.7 billion and $18.6 billion, respectively. The increase is primarily related to obligations to purchase agricultural commodity inventories at higher prices. As of June 30, 2022, the Company expects to make payments related to purchase obligations of $18.4 billion within the next twelve months. There were no other material changes in the Company’s contractual obligations during the quarter ended June 30, 2022.

Off Balance Sheet Arrangements

In May 2022, the Company extended its First Program with certain commercial and conduit purchases and committed purchasers and increased its facility from $1.6 billion to $1.8 billion. The First Program terminates on November 18, 2022 unless extended. In June 2022, the Company amended its Second Program with certain commercial and conduit purchases and committed purchasers and increased its facility from €0.6 billion ($0.6 billion) to €0.8 billion ($0.8 billion). For more information and disclosures on the Programs, see Note 14 of “Notes to Consolidated Financial Statements” included in Item 1 herein, “Financial Statements”. There were no other material changes in the Company’s off balance sheet arrangements during the quarter ended June 30, 2022.

Critical Accounting Policies and Estimates

There were no material changes in the Company’s critical accounting policies and estimates during the quarter ended June 30, 2022. For a description of the Company’s critical accounting policies, estimates, and assumptions used in the preparation of the Company’s financial statements, see Part II, Item 7 and Note 1 of “Notes to Consolidated Financial Statements” included in Part II, Item 8, of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

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